Islamabad, May 22, 2019: The government has reported 3QFY19 Budget Deficit at 2.3 percent of GDP, which is higher than the Budget Deficit reported in the corresponding period last year (2.1 percent of GDP). Budget deficit turned on higher side mainly on the back of incremental debt servicing. Overall expenditures up by 14 percent YoY, while revenue growth remained limited to 3 percent during the outgoing quarter.
According to Topline expenditures during 3QFY19 were up mainly due to the increase in debt servicing by 38 percent YoY, where domestic servicing was up by 12 percent to Rs. 525 billion and foreign servicing by 74 percent YoY to Rs. 58 billion. It is important to note here that incremental debt servicing alone contributed Rs161bn or 40bps to the fiscal deficit of 3QFY19
Another point to note is that during 9MFY18, the previous government was collecting tax revenues on telecom (mobile recharge) and higher taxes on the salaried class which remained absent during 9MFY19. We estimate revenue shortfall of Rs 125-130 billion under these heads, translating into an incremental deficit of 30-35bps during 9MFY19.
Among revenue heads, direct taxes were down 3 percent YoY to Rs 325 billion during 3QFY19 and sales tax revenues were down 1 percent YoY.
Taxes on international trade were up 16 percent YoY due to currency devaluation, which in rupee terms has increased taxes for the Govt.
Among expenditures, defense expenses enhanced by 28 percent YoY to Rs 295 billion, which was much anticipated due to border tension between India and Pakistan, while provincial expenditures were down 59 percent YoY